The ban, which will take effect on January 1, 2016, will significantly affect the several hundred Australian advisers helping the government as part of a $500 million dollar aid program.

During a session of PNG’s parliament, prime minister Peter O’Neill was asked about the decline of his country’s national intelligence organisation and the possibility foreign advisers were spying on PNG.

Mr O’Neill said it was important to rebuild the nation’s spy agency.

“We need to revamp it, we need to fund it, work closely with many intelligence agencies around the world and we are working closely with some of the best today,” he said.

“They’ve already come in and they’ve already starting helping rebuilding capacity within the national intelligence organisation and at my invitation.”

Mr O’Neill then dropped a bombshell, clearly aimed at Australian advisers working in areas such as policing, law and justice, treasury, planning and health.

“We’ve got people working in many of our departments that are working as advisers and it has led to two things,” he said.

“One is making our own people quite lazy. They’re not able to take over civil decisions, they are over-dependent on consultants and advisers and sometimes many of those decisions are not … in the best interests of our nation.

“So our government has taken a deliberate decision that by the end of the year, all foreign consultants and advisers, their contracts will end by 31st of December.”

Mr O’Neill then took aim at one particular group of advisers — the 70-odd Australian Federal Police officers working to improve PNG’s law and order situation.

“If we need to recruit experts, it will be recruited by PNG government as an employee of the PNG government,” he said.

“That includes policemen, that includes all the other consultants in every line department.”

Australia is the dominant aid partner to PNG and the announcement of a ban comes at a time of tension between the two countries over the Manus Island detention centre and a diplomatic blunder regarding Bougainville.

‘PNG acting in frustration it does not control advisers’

Jenny Haywood-Jones, the Myer Foundation Melanesia program director at the Lowy Institute for International Policy, said she was surprised the collecting of intelligence could be connected to advisers.

“Of course governments in the region and in particular in Papua New Guinea know that people that are advisers answerable to the Australian Government are reporting back to the Australian Government but I wouldn’t regard that as intelligence or spying,” she said.

“I think perhaps it’s reacting to a little bit of suspicion or frustration that the PNG government doesn’t have control of all the people that work … essentially for the government or in delivering government services.”

Ms Haywood-Jones said a ban on Australian advisers would have a dramatic impact on the aid program throwing staff contracts and long-term development into chaos.

The announcement appeared to take Australia’s Department of Foreign Affairs and Trade by surprise.

In a written statement to the ABC, a spokeswoman said just this: “We are aware of the prime minister’s comments. We will be discussing this with the government of Papua New Guinea.”